July 2, 2018
Administrators of qualified retirement plans have always had to deal with the problem of “missing participants” – that is, terminated vested participants for whom the administrator does not have a current mailing address or other contact information, and participants who refuse to respond to communications from the administrator. This problem frequently comes to light when a terminated participant nears retirement age or otherwise becomes entitled to receive a plan distribution, because at that time the administrator must contact the participant about distribution options, beneficiary designations, and other matters. And when a terminated participant approaches age 70½, the necessity of locating him or her becomes more urgent, because plan distributions generally must begin shortly after that age is reached.
Besides being an administrative problem, the inability to locate terminated participants can represent legal risks. The U.S. Department of Labor (DOL) has asserted that a plan’s inability to locate terminated participants can constitute a breach of duty on the part of the plan’s fiduciaries, in violation of ERISA. Lost or missing participants can also lead to plan disqualification risks; for example, if “required minimum distributions,” mandated under the Internal Revenue Code, cannot be made.